1. Pursuant to paragraph 5
of Security Council resolution 1153 (1998) of
20 February 1998, the enhanced distribution plan was
submitted by the Government of Iraq on 27 May 1998 and was
approved by the Secretary-General on 29 May 1998
(S/1998/446). Accordingly, a new 180-day period commenced at 0001
hours United States Eastern Standard Time on 30 May 1998.

2. The present report is
submitted pursuant to paragraph 10 of resolution
1153 (1998), which provides information up to 31 October
1998 on the distribution of humanitarian supplies throughout
Iraq, including the implementation of the United Nations
Inter-Agency Humanitarian Programme in the three northern
governorates of Dahuk, Erbil and Sulaymaniyah. It also describes
developments in the implementation of the programme since the
previous report, submitted to the Council on 1 September 1998
(S/1998/823).

4. The total quantity of oil
approved for export under the above contracts corresponds to
approximately 308 million barrels for 180 days - the highest
amount since the beginning of the programme. It should be noted
that the average quantity of oil exported from Iraq has increased
from 1.3 million barrels per day during the previous 180-day
period, to 1.7 million barrels per day during the current
reporting period up to 31 October 1998. Concurrently, during this
phase, oil prices for Iraqi crude have decreased to around $10
per barrel. At current prices, the total revenue projected for
this phase is estimated at $3.15 billion. After the deduction of
the minimum pipeline fee of $140 million, and the allocation of
revenue as set out in paragraphs 8 (a) to (f) of resolution
986 (1995), an amount of approximately $1.98 billion would be
available to finance the humanitarian supplies authorized in
resolution 1153 (1998) and the oil spare parts and equipment
authorized in resolution 1175 (1998). This amount falls far
short of the $3.1 billion required to implement fully the
enhanced distribution plan. Under each of the previous three
phases, $1.32 billion were made available for the humanitarian
programme. It may be recalled that in my letter dated 15 April
1998 (S/1998/330 and Corr.1), I had indicated that according to
the group of experts established pursuant to paragraph 12 of
resolution 1153 (1998), should the current average price of
$10.50 per barrel for Iraqi crude oil remain unchanged, based on
the existing capacity of 1.6 million barrels per day, revenues in
the amount of only $3 billion could be achieved during a 180-day
period, starting in June 1998, provided the spare parts required
were ordered immediately.

5. As at 31 October 1998,
the export of petroleum from Iraq under the current phase was
proceeding smoothly. Two hundred and nine liftings, totalling 255
million barrels at an estimated value of $2,576 million, have
been completed. About 50 per cent of the loadings have been made
at Ceyhan (Turkey).

6. The oil overseers have
continued to advise and assist the Security Council Committee on
the pricing mechanism, contract approvals and their
modifications, and other questions related to exports and
monitoring under resolution 986 (1995) and all subsequent
relevant resolutions. The overseers and the independent oil
inspection agents, Saybolt Nederland BV, deployed to observe oil
loadings and transfers, have also worked closely together to
monitor the relevant oil installations.

B. United Nations Iraq
Account

7. The United Nations Iraq
Account is divided into seven separate funds pursuant to
paragraphs 8 (a) to (g) of Security Council resolution 986
(1995). As at 31 October 1998, of the $5.256 billion authorized
under resolution 1153 (1998) for the 180-day period starting
on 30 May 1998 (phase IV), $2,039.5 million had been
deposited into the account for this period, bringing the total
oil proceeds deposited to the account since inception to
$8,399.2 million. The annex to the present report shows the
allocation of the total oil revenue among the various funds and
the corresponding expenditures to date.

8. In accordance with
paragraph 14 of the Memorandum of Understanding between the
United Nations and the Government of Iraq (see S/1996/356), the
United Nation Board of Auditors is conducting its third audit of
the United Nations Iraq Account and the Iraq Programme. The
second report of the Board of Auditors, covering the period 1
July to 31 December 1997, was submitted to me on 2 November 1998,
and forwarded to the Government of Iraq and the Security Council
Committee on 11 November 1998.

9. The Office of the Iraq
Programme, as well as other departments and offices concerned,
are taking the necessary action to implement the recommendations
of the Board of Auditors.

C. Prioritization,
processing and approval of applications, delivery to Iraq and
distribution to end-users

ESB (53 per cent) account

10. During the reporting
period, the Office of the Iraq Programme processed applications
for both phase III and the current phase under the enhanced
distribution plan. In accordance with the procedures of the
Security Council Committee, the Secretariat continued to
circulate for its consideration and approval applications in
advance of the availability of funds, on the understanding that
approval letters would be released by the Secretariat only after
confirmation that sufficient funds were available.

11. For phase III, 63
approval letters valued at $63,751,631 were awaiting the
availability of funds. The rate at which these letters can be
issued depends on reimbursements from the ESC (13 per cent)
account to the ESB (53 per cent) account. Reimbursement is
effected when the goods are delivered to northern Iraq. For the
enhanced distribution plan, 141 approval letters valued at
$378,531,496 were awaiting issuance. This was due primarily to a
revenue shortfall resulting from low oil prices.

12. Due to phase IV revenue
shortfalls, the full sectoral allocations set out in the enhanced
distribution plan could not be met during the current period of
180 days. Accordingly, the Office of the Iraq Programme has been
reviewing with the Permanent Mission of Iraq the Government's
proposed revised allocations, bearing in mind that sufficient
funds should be made available to meet the priorities set out in
the enhanced distribution plan, including food and nutrition, the
health sector, and spare parts and equipment for the Iraqi oil
industry. Approval letters continue to be released, in accordance
with the availability of funds, through an enhanced process of
weekly consultations with the Government of Iraq.

13. Approved contracts for
oil spare parts and equipment continue to be financed on a
proportionate basis from the ESB (53 per cent) and ESC (13 per
cent) accounts, as directed by the Security Council Committee. As
at 31 October 1998, 277 applications for oil spare parts and
equipment worth $155,932,902 had been received by the
Secretariat, of which 217, worth $132,632,124, had been
circulated to the Committee; 112, worth $88,819,265, were
approved and 77, worth $37,998,946, were on hold; 15, worth
$2,963,875, were being processed; and 5 had been cancelled. The
Secretariat continues, with the assistance of the independent oil
experts, to provide the Committee with technical information to
facilitate the approval of these applications. Applications for
oil industry spare parts received that require an amendment to
the distribution plan or other clarifications continue to be a
major source of delay in processing. As at
31 October 1998, 40 such applications, worth
$20,336,904, were under evaluation by the Office of the Iraq
Programme.

ESC (13 per cent) account

14. With respect to the ESC
(13 per cent) account, all 385 phase III applications submitted
as at 31 October 1998 have been approved. A total of 159 enhanced
distribution plan applications had been submitted, with 150
approved and one pending. As a result of ongoing implementation
of the information system set out in paragraph 53 (h) of my
report of 1 February 1998 (S/1998/90), the Office of the
Iraq Programme has intensified its liaison with United Nations
agencies and programmes in conjunction with daily reporting by
the independent inspection agents since 28 September 1998 upon
the arrival in Iraq of commodities financed by the ESC (13 per
cent) account.

15. The United Nations
independent inspection agents, Lloyd's Register, continue to
authenticate the arrival of humanitarian supplies at the entry
points in Al-Walid, Trebil, Umm Qasr and Zakho. In paragraph 53
(j) of my report of 1 February 1998 (S/1998/90), I requested the
United Nations independent inspection agents to enhance their
capacity to perform quality tests within the shortest period
technically feasible, as well as to perform quality tests inside
Iraq. To this end, the most recent contract with Lloyd's Register
provided for a mobile laboratory. Discussions continue with the
Government of Iraq concerning the Office of the Iraq Programme's
request for permission to set up the laboratory at Trebil. As of
28 September 1998, independent inspection agents have
also begun authenticating the arrival of humanitarian supplies
procured under the United Nations Inter-Agency Humanitarian
Programme for the three governorates of Dahuk, Erbil and
Sulaymaniyah.

B. Monitoring of oil
spare parts and equipment

16. In its resolution 1175
(1998) of 19 June 1998, the Council authorized States to permit
the export to Iraq of the necessary parts and equipment to enable
Iraq to increase the export of petroleum and petroleum products
in quantities sufficient to produce the sum established in
paragraph 2 of resolution 1153 (1998). A monitoring mechanism to
ensure effective monitoring of oil spare parts and equipment
utilizing the expertise provided by Saybolt Nederland BV, in
conjunction with Lloyd's Register, is now operational. Based on
the contracts received by the Secretariat, the first spare parts
procured under resolution 1153 (1998) could begin to arrive
towards the end of January 1999.

C. United Nations
observation mechanism

17. The activities of the
United Nations observers have been described in detail in
previous reports. Several notable initiatives were taken during
the current phase. In the food sector, as at 31 October 1998, 92
per cent of the food agents in the south and centre of Iraq and
all the food agents in the three northern governorates had been
visited by World Food Programme (WFP) observers. The Geographical
Observation Unit undertook observations to verify equitable
distribution and access to the ration in Nasiriyah, in response
to alleged involuntary population displacements in September
1998. Initial results were inconclusive and will be kept under
review.

18. In the health sector,
the World Health Organization (WHO) has started to use its list
of 451 essential drugs in 15 therapeutic groups as a reference
for tracking the availability of supplies. This will provide
information on the availability of supplies every 12 weeks and
will enable WHO to assess trends over a longer period. The
Multidisciplinary Observation Unit and WHO are assisting the
Ministry of Health in preparing extensive amendments to the
health annex of the enhanced distribution plan. In the water and
sanitation sector, the United Nations Children's Fund (UNICEF)
undertook a rapid assessment survey of 15 water treatment plants,
serving more than 4 million inhabitants in seven governorates in
the south and centre of Iraq in order to determine the impact of
the programme. The plants were selected according to the number
of beneficiaries and the value of supplies allocated under phases
I to III. In the agricultural sector, the Food and Agriculture
Organization of the United Nations (FAO) conducted end-user
surveys on machinery and spare parts, veterinary supplies and
agro-chemicals. In the electricity sector, the United Nations
Development Programme (UNDP), the Department of Economic and
Social Affairs of the United Nations Secretariat and
Multidisciplinary Observation Unit observers have reviewed the
state of the Nasiriyah and Mullah Abdullah power plants, which
involve major rehabilitation projects submitted under the
enhanced distribution plan. The results of these surveys are
reflected, as appropriate, in section IV below.

19. In the education sector,
United Nations agencies and the geographical and
multidisciplinary observers have continued to experience
difficulties in securing access to warehouses and schools because
of the limited capacity of the Ministry of Education to provide
enough escorts. Despite improvement during the previous reporting
period, no more than four escorts are available at any given
time. The Ministry of Foreign Affairs has given assurances that
it will increase the pool of escorts.

20. As at 31 October 1998,
foodstuffs valued at $2,483,429,089 had arrived in Iraq since the
beginning of the implementation of the programme, of which an
amount worth $2,128,100,405 was distributed to end-users in the
centre and south of the country. The focus of activity in this
sector has been to provide a food basket of 2,030 kilocalories
per person per day, including 47 grams of protein per person per
day, to every registered individual.

21. As a result of the
programme review undertaken in January 1998, I recommended, in my
supplementary report to the Security Council (S/1998/90), an
increase in the caloric value of the food basket to 2,463
kilocalories per person per day. In the enhanced distribution
plan, the Government proposed a food basket that would provide
2,300 kilocalories per person per day. However, owing to the
limited funds available, the Government has decided to distribute
a food basket with the same caloric value as that distributed
during phase III, at 2,030 kilocalories per person per day.

22. During the first three
months of the present reporting period, the distribution of food
met 97 per cent of the planned caloric requirement and
91 per cent of the planned protein requirement of the
food basket. Since then, the food basket has been distributed in
full. This marks the first time since the beginning of the
programme that full rations have been distributed for three
consecutive months. In 97 per cent of households consulted, the
food baskets were received on time. However, household visits by
WFP observers in the south and centre of Iraq show nearly two
thirds of households reporting that the food basket lasts only 20
days or less.

23. Food prices offer a sign
of the affordability, and therefore the availability, of
foodstuffs in the market. Following an overall decline in food
prices throughout 1997, food prices have begun to rise in 1998,
suggesting a reversal in the trend towards greater affordability
of food.

Health and nutrition

24. As at 31 October 1998,
medicine valued at $444,680,873 had arrived in Iraq since the
beginning of the implementation of the programme, of which an
amount worth $183,725,879 was distributed to end-users in the
centre and south of the country. The focus of activity in this
sector has been to provide a broad range of medicines, medical
and dental equipment and to support the distribution of supplies
in order to maintain a minimum level of health services.

25. A surge in the arrival
of commodities from April 1998 onwards, coupled with the lack of
transport, has added to the congestion in warehouses and slowed
distribution. The handling equipment in warehouses has not been
sufficient to make the best use of the existing space. Some bulky
equipment has been transferred from central to governorate
warehouses, but in many instances, this has served only to shift
the handling problem to governorate warehouses. Increased
arrivals, and the failure of some suppliers to provide testing
methodology and standard solutions, have taxed the already
inadequate facilities at testing laboratories and have extended
the average processing time from two to three-and-a-half weeks.

26. More medicines and
supplies are reaching health centres and are being dispensed to
patients. The number of surgical operations has increased by
33 per cent from January to August 1998. Hospital in-patient
departments receive sufficient quantities of medicines and
supplies and, in all types of health facilities, there has been a
steady increase in patient attendance. The availability of drugs
in most public health facilities has reduced the frustration of
patients previously unable to find drugs, even though some
essential drugs are still not available, and even though primary
health facilities continue to be less well-stocked than are
hospitals.

27. Some areas require
attention. An improved epidemiological surveillance system is
needed for ensuring that the procurement and distribution of
drugs meets the different needs of an array of health centres and
populations. A recent survey of water and sanitation facilities
in hospitals has indicated that the poor condition of facilities
poses a genuine health hazard. Without improvements in facilities
and in staff motivation, the arrival of commodities will have
little overall impact on public health services, although the
range of treatment and availability of drugs can be expected to
continue to expand.

28. With regard to nutrition
under the current phase, the Ministry of Health provided
assurances that it would procure the 8 million dollars' worth of
high protein biscuits and 2.4 million dollars' worth of
therapeutic milk contained in the distribution plan under this
sector. If applications are submitted soon, these commodities
could begin to arrive in the first few months of 1999 and be
distributed through the existing network of community child care
units, primary health centres and hospitals. UNICEF continues to
provide, through its regular programme, support for maintaining
and eventually doubling the 1,333 existing community child care
units and support for 61 nutrition rehabilitation centres and the
Nutrition Research Institute.

29. The nutritional status
of the Iraqi population depends on access to food, as well as on
other factors such as clean water, adequate sanitary conditions
and health care. UNICEF has recently assessed the prevalence of
malnutrition among infants and children under five during the
latest in a series of nutritional status surveys. The latest
survey, based on WHO/Centers for Disease Control and Prevention
(CDC) reference criteria, indicates that general malnutrition
among infants has stabilized at 14.7 per cent over the past year.
The prevalence of general malnutrition (weight for age) for
children under five has stabilized around 25 per cent in the same
period. This indicates that, following the implementation of
resolution 986 (1995), previously rising levels of malnutrition
appear to have stabilized.

Water and sanitation

30. As at 31 October 1998,
chemicals, supplies and equipment for water and sanitation valued
at $37,229,993 had arrived in Iraq since the start of the
implementation of the programme, of which an amount worth
$15,982,619 was distributed to end-users in the centre and south
of the country. The focus of activity in this sector has been to
improve the quantity and quality of drinking water through the
provision of both purification chemicals and equipment for
treatment plants. It has also included the maintenance of
equipment for operating urban sewage networks at a minimum level.

31. There have been modest
increases in the pace of contracting and implementation in the
past six months, but these rates of implementation vary
considerably between urban and rural areas on the one hand, and
among governorates on the other.

32. The pace of
implementation has been constrained by the lack of cash for
providing inputs such as gravel, sand, cement, pipes, digging and
drainage equipment, and labour. A UNICEF analysis has estimated
that over $2 million in cash is required to undertake the urgent
rehabilitation of 43 water treatment plants. Likewise, over $1.5
million is required for the implementation of the emergency
maintenance of 99 compact water treatment units.

33. In the 15 specific sites
where resolution 986 (1995) inputs have been surveyed recently,
there have been increases of between 10 per cent and
25 per cent in the availability of water. However, the
increase in water production at other water treatment plants, not
covered by this survey but receiving inputs nonetheless, may not
have been that high. The inputs, in general, have slowed the pace
of deterioration but the equipment does not address all the needs
of the plants, nor do the funds suffice to significantly reverse
the present deterioration. The observers report that one of the
reasons for the low implementation rate, and overall minimal
impact, is the low level of resources available to the sectoral
authorities.

34. Untreated effluent from
malfunctioning sewage systems throughout the 15 governorates
flows into rivers and poses an increasingly serious environmental
hazard. In Baghdad, where the programme has provided jetting
vehicles to clean clogged sewers and 43 pumps for 30 pumping
stations, the system's capacity to discharge sewage is reported
to have improved by 20 per cent. In other areas,
because of delays in ordering and installation, pumping stations
and treatment facilities are deteriorating rapidly.

35. Ongoing monthly testing
of water quality by the Ministry of Health has shown that water
quality is improving modestly. Tests conducted in June 1998
indicate a trend towards improvement in water quality over the
past three months in all governorates except in Tamim, Ninevah
and Mutthana. The authorities have agreed to endorse a
UNICEF-initiated national assessment of the water and sanitation
sector to be conducted in early 1999.

Agriculture

36. As at 31 October 1998,
agriculture inputs valued at $56,901,523 had arrived in Iraq
since the beginning of the implementation of the programme of
which an amount worth $23,629,613 was distributed to end-users in
the centre and south of the country. The focus of activity in
this sector has been to reduce the deterioration of agricultural
machinery and to provide a minimum level of farm and animal
production inputs as a contribution to enhancing food security.

37. In most subsectors, the
efficiency of delivery and distribution has improved. On the
other hand, it has become apparent that the resources provided do
not adequately meet the needs of the farmers. The total number of
tractors ordered under phases I to III is 825, which represents
only 2.5 per cent of the estimated total requirements.
A recent FAO survey of the existing stock of agricultural
machinery indicated that 75 per cent of the combine
harvesters and 63 per cent of the tractors needed major
repairs to function adequately. Priority in distribution of spare
parts has been given to governorates according to their
productivity in specific crops, so that 70 per cent of
the spare parts have been distributed to the six governorates
that are major food-crop producers, while 46 per cent
of the pumps have been given to the five major rice-producing
governorates.

38. The rate of approval and
distribution for veterinary supplies has likewise increased
although, lacking cold storage, appropriate equipment and
transportation, certain vaccines and medications could have lost
their potency in transit. Inadequacy remains a serious concern.
Only 4 of the 32 district distribution points recently
interviewed reported receiving sufficient medications.

39. Some issues need
attention. Late delivery remains a crucial constraint since
inputs must synchronize with the seasons. Pesticides, for
example, which were ordered in phase III, arrived too late for
use in the 1998 cropping season. In this case, the delay was due
to the slow rate of approval and contracting. The replacement of
electric irrigation pumps with diesel ones has made more water
available to farmers, but the deterioration of almost all pumps
that drain farm lands has increased the threat of waterlogging
and salinization.

40. While FAO has noted
increases in yields since the beginning of the programme, United
Nations observers agree on the need to determine the extent to
which these increases can be attributed to inputs purchased under
resolution 986 (1995). In turn, it will also be necessary to
assess the impact of higher food production on food security
throughout the country.

Electricity

41. As at 31 October 1998,
electricity equipment valued at $44,269,290 had arrived in Iraq
since the start of the implementation of the programme, of which
an amount worth $43,834,000 was distributed to end-users in the
centre and south of the country. The focus of activity in this
sector has been the delivery of electrical equipment to 21 power
plants and to the four maintenance departments for each of the
electricity distribution authorities, with the objective of
slowing down the deterioration of the system by responding to
emergency requirements.

42. At present, most power
plants are working at less than 50 per cent of their
installed capacity. The inputs so far have done little to improve
this overall output since, in dollar terms, the inputs for phases
I to III are not sufficient to make any substantial impact on the
system as a whole. So far, inputs have increased electrical
generation by little more than 2 or 3 per cent.

43. Were the full allocation
under the current phase to be realized, this would bring about a
significant improvement. It is estimated that the present gap of
1,500 MW between supply and demand could be reduced by
660 MW once this plan is realized, including most
particularly, the proposed rehabilitation projects at Nasiriyah
and Mullah Abdullah. Meanwhile, deterioration continues and, as a
result, load-shedding is likely to be worse in 1999 than in 1998.

Education

44. As at 31 October,
education supplies valued at $19,530,539 had arrived in Iraq
since the start of the implementation of the programme, of which
an amount worth $5,587,931 was distributed to end-users in the
centre and south of the country. The focus of activity in this
sector has been to prevent the further deterioration of primary,
secondary, vocational and higher education facilities by
repairing schools, by providing classroom furniture, school
supplies and other teaching aids and by refurbishing the Ministry
of Education printing press used for producing textbooks.

45. The low rates of
implementation are partially explained by the delay in receiving
inputs for the printing of textbooks, the rehabilitation of
schools and the production of school furniture. There are
continuing obstacles to delivering inputs to schools and
installing them. Since the Ministry of Education has not been
able to transport materials from warehouses to schools, 40 new
trucks have been ordered to facilitate deliveries. The Ministry
of Education has provided $250,000 to facilitate delivery of
commodities but this has only partially sufficed to pay for
labour and associated materials.

46. Observers estimate that
some inputs have reached approximately one third of the over
8,000 primary and secondary schools in the 15 governorates. The
distribution of commodities has begun for the rehabilitation of
some 2,000 primary schools identified by the Ministry of
Education in its distribution plan. UNICEF estimates that
approximately $144 million is required to meet the present needs
for school rehabilitation, and of this amount, only
$24 million, or 14 per cent, has so far been
allocated. Based on UNICEF estimates, a cash component of
$25 million is needed for the essential rehabilitation of
4,500 primary schools. These needs include the repair of
lavatories, the provision of chalkboards and the restoration of
dilapidated structures. About 50,000 desks have been produced and
distributed, while another 50,000 are awaiting distribution.
School desk production has been affected by the delay in
importing manufacturing components. Paper, medical books,
laboratory equipment, photocopying machines, computers, printers
and a number of other teaching aids have all been contracted and
are in the process of arrival or distribution.

47. Net primary enrolment
levels fell from 94 per cent for school age children in
1991 to 84 per cent in 1996. There is no indication of
any improvement in these rates.

B. Programme
implementation in Dahuk, Erbil and Sulaymaniyah Food

48. As at 31 October 1998,
foodstuffs valued at $327,188,471 had been distributed to the
three northern governorates under the bulk purchase agreement
with the Government of Iraq since the start of the implementation
of the programme. The focus of activity in this sector for the
northern governorates has paralleled that in the centre and south
of the country, which is to provide a food basket to every
registered person containing 2,030 kilocalories per person per
day, including 47 grams of protein per person per day.

49. There are, however,
significant differences. The contents of the food basket last
longer in the north of the country than in the south and centre.
While 97 per cent of households receive their food
baskets on time in the south and centre, only
77 per cent do so in the north. This observation is
subject to further review by WFP to determine if the difference
is caused by a variation in the methodology of data collection or
by the uneven arrival of food. Evidence suggests that the food
basket features less prominently in the daily diet of the
population in the northern governorates than in the south and
centre.

50. Unlike the southern and
central governorates, there have been noticeable changes in the
incidence of malnutrition in the north. In April 1998, the
prevalence of general malnutrition (weight for age) among
children under five dropped from a previous high of
25.8 per cent in December 1994 to
15.1 per cent. All results are based on WHO/CDC
reference criteria. Many factors influence prevalence levels,
including water quality, sanitation facilities and health
facilities. Caution must therefore be exercised in attributing
these changes exclusively to the resolution 986 (1995) food
and targeted nutrition programme.

Health and nutrition

51. As at 31 October 1998,
medicines valued at $19,130,292 had been distributed to the three
northern governorates under the bulk purchase agreement with the
Government of Iraq since the start of the implementation of the
programme. The focus of activity in this sector has been to
achieve a consistent and reliable flow of medicines and medical
supplies in order to maintain a minimum of health services, and
to provide therapeutic milk and high protein biscuits to
malnourished children and pregnant and lactating mothers.

52. WHO, in collaboration
with local authorities, implements the distribution of supplies
and equipment for health programmes to 29 hospitals and 381
health centres. The therapeutic milk and high protein biscuits
are dispensed at nutrition rehabilitation centres, primary health
centres and community child care units. WFP carries out the
distribution of supplementary food rations to malnourished
children and their families.

53. In spite of complaints
from local authorities, medicines are more widely available in
the north of Iraq than in the south and centre, thanks to the
efficient distribution system set up in collaboration between WHO
and the local authorities. Very few health centres, if any,
ration the dispensing of medicines. The monthly allocations of
tracked items cover the needs for more than one month, whereas in
the south and centre, their coverage ranges between 10 and 30
days. The increased supply of drugs has led to a twofold to
threefold increase in the number of patients who avail themselves
of them, but in spite of this, monthly allocations in most
locations last the full 30 days. The introduction of health
ration cards by WHO within the next month is expected to reduce
abuses of medical supplies.

54. With regard to
nutrition, UNICEF is at present expanding the number of community
child care units from 64 to 170, to be completed in
December 1999, in order to provide better coverage of the
targeted group of 250,000 children under five, of which only
120,000 have officially been referred to primary health care
centres so far. A client group of 1,000 children are screened on
a regular basis by the community child care units where
preliminary treatment is provided, referrals are made to primary
health care centres, and volunteer staff members provide ongoing
nutrition education and monitoring. UNICEF and the geographical
and multidisciplinary observers, in collaboration with the
Ministry of Health, are currently undertaking a study of water
quality and health in order to examine the link between water
quality, the spread of water-borne diseases and the persistence
of moderately high levels of underweight children.

Water and sanitation

55. As at 31 October 1998,
chemicals, supplies and equipment valued at $28,078,528 had
arrived in the three northern governorates since the start of the
implementation of the programme, of which an amount worth
$21,659,951 was distributed to end-users. The focus of activity
in this sector has been to maintain the existing level of water
treatment and delivery, as well as sanitation services, in both
urban and rural areas. Specific programmes have been designed to
assist rural communities to build capacity in maintaining local
water and sanitation facilities.

56. An improvement in water
quality has resulted from the replacement by UNICEF of 136 broken
water pumps and the repair of 20 kilometres of pipe and the
installation of 183 chlorinators, together with the provision of
chemicals in the three principal cities. Sanitation services have
been improved by the 11 new garbage compactors and the eight
sewage tankers made available by UNICEF to the three cities, and
the construction of six kilometres of sewerage channels is near
completion. In rural areas, 97 water projects and 25 sanitation
projects have been completed at the community level.

57. A comprehensive water
and sanitation planning exercise is needed in the northern
governorates. One of the more critical issues is the need for a
sewage treatment plant in Erbil City. A storm drain system is
under construction and, unexpectedly, a number of individual
households and institutions have been disposing of their sewage
through illegal connections to the storm drain. Raw sewage is
being deposited outside the city in farmlands at the outlet of
the storm drain. While posing a serious health hazard, this
offers the possibility of connecting a low-cost treatment plant
to the storm drain, thus laying the foundation for a much needed
sewage system.

58. According to local
authorities, both the availability and the quality of water have
improved significantly over recent months. Recent water testing
in all three northern governorates by WHO and the Department of
Health has shown that the incidence of bacteriological
contamination of water samples in urban areas dropped from
24 per cent of the samples in July 1998 to less
than 5 per cent of the samples in September 1998.

Agriculture

59. As at 31 October 1998,
agriculture inputs valued at $40,369,420 had arrived in the three
northern governorates since the start of the implementation of
the programme, of which an amount worth $24,619,333 was
distributed to end-users. The focus of activity in this sector
has been to provide essential agricultural inputs to sustain the
levels of production already achieved with resolution
986 (1995), to reverse environmental degradation through
forestry and farming practices, to revive the agricultural
extension service and to contribute to food security.

60. Wheat production
constitutes the major farming activity in the northern areas,
occupying about 80 per cent of the cultivated area.
Much of the FAO programme in the north is aimed at providing
subsidized inputs to small and medium-sized farms in order to
reduce the cost of wheat production and to increase income. FAO
reports a 25 per cent increase in yields per hectare
and a decrease of 26 per cent in the cost of production
as against the previous season. The Government has advised the
Secretariat that, as at 31 October 1998, it had
purchased a total of 185,000 tons of wheat and barley from the
north, which is four times the quantity purchased in previous
years and represents some 30 per cent of the total
crop. The FAO programme has provided concentrated feed,
pharmaceuticals and support facilities to both large and small
poultry houses, which now total 227, up from 25 prior to
resolution 986 (1995). In addition, 31,500 layer chickens
and 106 tons of protein-rich poultry feed were distributed to
6,980 needy families in remote rural areas. As a result of
increased poultry production, there has been a 35 to
40 per cent reduction in the market price of live
broilers. This, in turn, has reactivated a dormant market in
broiler meat. An estimated 85 per cent of animals in
the region have been treated or vaccinated against major
diseases, covering approximately 90 per cent of all
livestock owners. FAO estimates the impact to be a
25 per cent increase in the number of animals and this
is reflected in a decrease of about 40 per cent in the
price of meat sold in the market.

Electricity

61. As at 31 October 1998,
electricity equipment valued at $11,942,379 had arrived in the
three northern governorates since the start of the implementation
of the programme, of which an amount worth $2,776,081 was
distributed to end-users. The focus of activity in this sector
has been to arrest the deterioration in the distribution and
transmission networks and to rehabilitate the two hydropower
plants at Dokan and Derbandikhan, the only sources of power
generation in the north.

62. Procurement and delivery
in this sector have been disappointingly slow, and project
implementation has not yet reached a level where a steady supply
of electricity to hospitals, schools and water and sanitation
facilities can be ensured. To date, supplies worth only some
$20 million have been contracted. Most of the remaining
phase I supplies are expected to arrive by December 1998,
while phase II and III supplies are in the process of being
procured and are expected to arrive in the first and second
quarters of 1999. Most complementary items, which were not
ordered previously, are being ordered, and delivery is expected
by mid-1999.

63. As noted in my previous
report (S/1998/823), management measures have been taken to
remedy the slow progress in this sector. UNDP has appointed a
full-time senior programme manager to Erbil responsible for the
supervision and coordination of field activities, and project
offices have also been established in Dahuk and Sulaymaniyah. The
Office of the Iraq Programme, UNDP and the Department of Economic
and Social Affairs of the United Nations Secretariat are jointly
monitoring the implementation of the programme. All 12 consulting
engineers responsible for emergency repairs and other work on the
two dams have been recruited and are in the field, following a
waiver of the normal bidding procedure so as to enable immediate
deployment. Nevertheless, cumbersome and slow procedures for
procurement still hamper the operation and options to speed this
up are being looked into by the Office of the Iraq Programme,
UNDP and the Department of Economic and Social Affairs.

64. Repairs to the spillway
gate anchorages have started and the repairs necessary to prevent
catastrophic failure are nearly complete. Following the
completion of structural integrity surveys, safe water levels
were calculated for Derbandikhan dam, and the water levels have
been maintained at acceptable levels. Engineering consultants are
to commence the rehabilitation of Dokan's generating units in
November 1998. In Erbil governorate, four diesel generating
sets will be installed in December 1998 and will provide
emergency standby power generation to hospitals and water pumping
stations. While weekly planning and review meetings are now held
in each of the three governorates and a monthly meeting with
representatives of the local authorities is held in all three
governorates, implementation can still concentrate only on the
most viable and urgent projects to prevent further deterioration
of generating capacity. Fundamental decisions agreed to by all
parties involved need to be taken on the relation of the
programme in the northern governorates to the rehabilitation of
the national grid.

Education

65. As at 31 October 1998,
education supplies valued at $13,765,406 had arrived in the three
northern governorates since the start of the implementation of
the programme, of which an amount worth $10,570,818 was delivered
to end-users. The focus of activity in this sector has been the
rehabilitation of schools, the production and distribution of
desks, training programmes for teachers and the provision of
school supplies. These activities were implemented by UNICEF and
UNESCO. In addition, UNICEF has installed printing presses in
Erbil and Sulaymaniyah, and UNESCO has started the construction
of a small number of new schools, and the setting up of a chalk
factory.

66. Out of a planned number
of 110,000 desks, approximately 71,000, or 64 per cent,
have been produced and distributed. This meets
70 per cent of the needs if schools continue to operate
in shifts. Since the installation of equipment for the chalk
factory has been delayed, UNESCO will purchase chalk until the
factory becomes operational. UNESCO has undertaken construction
in 64 per cent of the 159 schools targeted for
rehabilitation. Another 142 schools have been rehabilitated by
UNICEF.

67. Following the
rehabilitation of a number of schools and an increase in the
availability of school supplies, a UNICEF survey has found that
net primary enrolment rates rose from 81 per cent in
1996 to 91 per cent during the reporting period.

68. In the area of child
protection, UNICEF has supported the training of social workers
and equipped 25 centres for disabled children. UNICEF has also
signed agreements to increase the production of prosthetic and
orthotic fittings for 4,000 children disabled by mines and with
related injuries.

Rehabilitation of
settlements

69. As at 31 October 1998,
commodities valued at $3,699,764 had arrived in the three
northern governorates since the start of the implementation of
the programme, of which an amount worth $1,894,728 was
distributed to end-users. In addition to the procurement of
supplies and equipment, the United Nations Centre for Human
Settlements (Habitat) has disbursed $1,044,605 in cash towards
the implementation of its programme. The focus of activity in
this sector has been to facilitate the resettlement of those
displaced persons who wish to return to their homes by
rehabilitating their villages of origin, and to assist in the
construction of infrastructure in urban areas for persons who
have sought refuge in urban and semi-urban areas.

70. Residents of
approximately 4,5000 villages in the three northern governorates
have been displaced over the past two decades and are now living
in collective towns. Displaced residents have now returned in
60 per cent of these villages. During phases I to III,
the United Nations Centre for Human Settlements (Habitat) has
assisted in the resettlement of a selection of these villages by
constructing 122 schools, 31 health centres, 56 water and
sanitation projects, 48 access roads, 7 bridges and 13 veterinary
clinics. A total of 17 villages have been completely rebuilt.

71. The composition of the
displaced population now includes: (a) those in collective
towns who are unable to return; (b) those who do not wish to
return; and (c) those displaced persons who have taken
refuge in urban and semi-urban areas and who, because of their
vulnerable position, require water and sewage and other
infrastructure services. The Centre has reoriented its programme
to focus both on the original target group of those wishing to
return, as well as on the most vulnerable of those displaced
persons who have taken refuge in urban and semi-urban areas.
These two groups make up 0.8 million persons.

Demining activities

72. As at 31 October 1998,
demining equipment valued at $1,548,101 had arrived in the three
northern governorates since the start of the implementation of
the programme, of which an amount worth $1,542,905 was
distributed to end-users. In addition to funds utilized for the
procurement of the necessary supplies and equipment, the United
Nations Office for Project Services (UNOPS) has disbursed
$5,699,485 in cash towards the implementation of its programme.
The focus of activities in this sector has been to identify
existing mine fields, train local de-miners, field survey teams
and demining teams, carry out demining operations and conduct
mine-awareness programmes for national and international staff of
the United Nations, the International Committee of the Red Cross
and non-governmental organizations.

73. A minefield and mine
victim survey of northern Iraq currently employs 12 teams, which
are expected to complete their work in less than 11 months. The
survey will provide reliable estimates on the size and location
of mine-affected areas and on the numbers of deaths and injuries
from mine-related accidents. The results will be openly available
and will provide the facility for printing, on demand, maps
marked with details of minefields and locations of victims and
accidents.

74. Studies indicate that
there are approximately 210 million square metres of
minefields, disregarding minefields that continue to be added and
new discoveries. These include 4.5 million square metres in
Dahuk, 55.7 million square metres in Erbil and
149 million square metres in Sulaymaniyah. It is estimated
that it will take between 35 and 75 years to clear those
minefields. The United Nations has agreed with the Government of
Iraq not to carry out demining activities in areas within five
kilometres of the border with the Islamic Republic of Iran.
Exceptions to this rule may be sought from the Government for
residential farming areas within this limit.

75. In addition to isolated
security incidents leading to the temporary withdrawal of staff
from Choman and Sawita, the pace of removal is affected by the
difficulty of detection. Since the mined areas contain metal
fragments, it is difficult for most mine detectors, notably those
acquired during phases I and II, to distinguish mines from other
metal objects. To remedy this shortcoming, three mine detection
dog teams totalling six dogs have been deployed to the region.
This has accelerated the process considerably. In addition, UNOPS
has launched a programme to evaluate local dogs as potential
detection dogs, in line with the continuous efforts to develop a
local demining capacity.

76. UNOPS continues to
support two prosthetic centres in Erbil and Sulaymaniyah, and the
construction of a third in Dahuk. The two existing centres have
provided medical attention to 171 in-patient casualties, 1,634
out-patients and currently provide physiotherapy to 726 patients.

77. Despite the increase in
the volume of exports of oil, the financial target of the $3.1
billion required for the implementation of the enhanced
distribution plan has not been met owing to low oil prices. The
full implementation of the plan would have permitted a
multisectoral approach to malnutrition and would have helped in
preventing further deterioration of the humanitarian situation.

78. Nevertheless, the
programme has continued to help provide a more adequate food
basket to the Iraqi people. Given the complex interplay of food
supply, health and hygiene issues, however, the full nutritional
benefit of extra foodstuffs has not yet been realized. Surveys of
infant malnutrition show that the improvement already noted from
1994 onwards in the three northern governorates has been
sustained. However, in the centre and south of Iraq, infant
malnutrition while not worsening, continues to be a grave
concern. It is regrettable that although included in the enhanced
distribution plan, to date no applications for targeted nutrition
supplies have been received by the Secretariat.

79. Although FAO estimates
that there has been a 15 per cent increase in wheat and barley
yields this year, domestic food production in the centre and
south of Iraq continues to suffer major shortages of inputs; food
prices on the open market have risen, to the disadvantage of the
poor. By contrast, however, food production in the three northern
governorates has increased substantially and the food prices on
the open market have continued to decline.

80. In the health sector, an
increasing influx of supplies has expanded the range of treatment
available and drugs are more widely available at all levels of
the health-care system. Preventive health care, however, has not
received appropriate attention. The full range of urgently needed
essential drugs is still not available on a regular basis, mostly
because of poor procurement planning and stock management. Major
problems are also encountered in ensuring the timely distribution
of the hospital equipment that has been received under the
programme.

81. The electricity, water
and sanitation sectors have been experiencing similar problems in
that inputs tend to have only a localized impact, which cannot
offset the continuing structural deterioration of those sectors
as a whole. Increased quantities of chlorinated water are being
produced; however, the decaying distribution network precludes
guaranteed safe drinking water. Water-borne diseases continue to
be a major threat. The enhanced distribution plan has started to
address the widening gap between supply and demand of
electricity. However, because of limited funding, there can be no
short-term solutions to the accelerating deterioration in the
power generation and distribution systems. The consumers will
therefore experience worse power cuts next year than at present.

82. Although an increasing
number of schools are receiving furniture and educational
supplies under the programme, relatively little rehabilitation of
school buildings has taken place throughout the country. Improved
distribution of school supplies in the three northern
governorates has brought about an increase in enrolment.

83. The present funding
constraints are likely to continue. It is estimated that for the
current phase revenues will reach $3.15 billion. After deductions
pursuant to paragraph 8 of resolution 986 (1995), $1.98 billion
will be available for the humanitarian programme, including $300
million for oil spare parts and equipment, as authorized by
resolution 1175 (1998).

84. As outlined in my letter
dated 15 April 1998 addressed to the President of the Council
(S/1998/330 and Corr.1), the oil industry of Iraq is in a
lamentable state, with the initial authorized sum of $300 million
for spare parts and equipment being sufficient only for the most
essential and urgent needs. During the contracting process,
significant price increases for many items on the list have been
identified. The delays in the pace of approvals for spare parts
and equipment for the oil industry are regrettable. While
welcoming the fact that a number of applications placed on hold
have now been released, I hope the Security Council Committee
will expedite the approval of applications essential for the
increase of oil production and exports. At the same time, I urge
the Government of Iraq to further prioritize its request for
spare parts and equipment with a view to enhancing its oil export
capacity. The Secretariat remains ready to assist the Security
Council Committee in providing any additional information
required in the consideration of the applications concerned.

85. The failure to reach the
target of $3.1 billion for the implementation of the enhanced
distribution plan for the reasons given above has been compounded
by the increased level of funds due for reimbursement from the 13
per cent account to the 53 per cent account, for bulk procurement
of food and medicine, which now totals $237,588,447. It is
essential to resolve this matter most urgently in order to
improve the pace of implementation and effectiveness of the
programme. The Office of the Iraq Programme is reviewing various
options to resolve the difficulties encountered.

86. Bearing in mind the
magnitude of the overall humanitarian situation in Iraq, I
recommend that the Security Council extend the relevant
provisions of resolution 1153 (1998) for a further 180-day
period, subject to any other relevant action with regard to the
provisions of resolution 661 (1990).

87. I take this opportunity
to express my appreciation for the dedication and commitment of
all staff of the United Nations system involved in the
implementation of the programme. I also wish to express my
appreciation to the Government of Iraq for its cooperation.

1. The Security Council, in
its resolution 1153 (1998), authorized the Government of Iraq to
export petroleum and petroleum products for a new period of 180
days beginning at 0001 hours Eastern Standard Time on the day
after the President of the Council informed the members of the
Council that he had received the report of the Secretary-General
approving the distribution plan submitted by the Government of
Iraq. The enhanced distribution plan was approved by the
Secretary-General on 29 May 1998, and the 180-day period
commenced at 0001 hours Eastern Standard Time on 30 May 1998.

2. As at 31 October 1998, of
the $5.256 billion authorized under resolution 1153 (1998),
$2,039.5 million had been deposited into the account for
phase IV, bringing the total oil sale since inception to
$8,399.2 million.

3. The allocation of total
oil proceeds received from inception to date and the
corresponding expenditures are as follows:

(a) $4,194.5 million has
been allocated for the purchase of humanitarian supplies by the
Government of Iraq, as specified in paragraph 8 (a) of
resolution 986 (1995). Letters of credit issued by the
Banque Nationale de Paris on behalf of the United Nations for the
payment of those supplies for the whole of Iraq amounted to
$4,357.9 million under phases I-IV, which include an amount of
$163.4 million due for the reimbursement for bulk purchases made
by the Government of Iraq for northern Iraq and distributed by
the United Nations Inter-Agency Humanitarian Programme;

(b) $1,028.2 million has
been allocated for the purchase of humanitarian goods to be
distributed in the three northern governorates by the United
Nations Inter-Agency Humanitarian Programme, as specified in
paragraph 8 (b) of the resolution. Expenditures
recorded for humanitarian goods approved by the Security Council
Committee amounted to $656.0 million;

(c) $2,492.1 million has
been transferred directly into the United Nations Compensation
Fund, as specified in paragraph 8 (c) of the resolution. As
at 31 October 1998, a total of $68.3 million had been
allotted to cover the operating expenditures of the Compensation
Commission and an amount of $1,901.6 million for payment of
the first, second third and fourth instalments of "A"
and "C" claims;

(d) $175.2 million has been
allocated for the operational and administrative expenses of the
United Nations associated with the implementation of resolution
986 (1995), as specified in paragraph 8 (d) of the
resolution. Expenditures for administrative costs for all United
Nations entities involved in implementing the resolution amounted
to $115.9 million;

(e) $59.4 million has been
allocated to the United Nations Special Commission for the
Disarmament of Iraq (UNSCOM) for its operating expenses, as
specified in paragraph 8 (e) of the resolution. Expenditures
for the Commission amounted to $42.3 million;

(f) $370.7 million has been
set aside for the transportation costs of petroleum and petroleum
products originating in Iraq exported via the Kirkuk-Yumurtalik
pipeline through Turkey, in accordance with paragraph 8 (f)
of the resolution and in line with procedures adopted by the
Security Council Committee. Of that amount, $289.7 million has
been paid to the Government of Turkey;

(g) $79.1 million has been
transferred directly to the escrow account established pursuant
to resolution 706 (1991) of 15 August 1991 and 712 (1991) of
19 September 1991 for the repayments envisaged under paragraph 6
of resolution 778 (1992) of 2 October 1992, as specified in
paragraph 8 (g) of resolution 986 (1995).